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Tuesday, September 22, 2015

Why write “The Chameleon in the Room”? How does it differ from other Risk Books?

My purpose in writing this book was to fill the gap that I perceive exists in the technical literature relating to enterprise risk management. To my mind Banks and Financial Institutions are well served by academia, since they have invested heavily in sponsoring research, but that research has focussed on producing data driven and probability orientated solutions.

Such solutions are by their nature backward looking since the only data that exists arose in the past and deduced probabilities are extrapolations based on data. Therefore those solutions only have limited reliability (a) in relation to risk drivers that occurred in the past and (b) in relation to large portfolios of risky transactions.

Some time ago this realisation led me to focus on a holistic future-oriented risk assessment and management approach, which is the foundation of this book.

The current and increasingly rapid rate of change in the global business environment has rendered data driven risk control methods inadequate. Therefore those responsible for the leadership, operation and survival of real businesses - and credit executives managing narrow B2B customer and supplier portfolios - cannot usefully employ probability based approaches.

Common business risks are well understood and can be anticipated, so owners or executives having read my book Global Credit Management – an Executive Summary, for example, will undoubtedly put in place measures to ensure the durability of their business should common risks arise.

However research and experience over the past 30 years has established that in most cases when businesses failed the cause was either:
A – An unimaginable risk driven by a unique occurrence, or
B - Due to the actions of incompetent or fraudulent management.

Incompetence and fraud are risk drivers that are well understood and managed through internal/external audits and, in the case of buyers and suppliers, by thorough analysis and careful on-going monitoring by credit risk executives.

However unimaginable risk drivers have thus far been overlooked simply because they cannot be imagined, described or counted.

Nevertheless they will occur in the future and they are the risks most likely to kill real businesses.

Examples of such risks are Black Swan Event Risk, Liquidity Risk, Operational Risk, Correlation-Concentration Risk and Ignored External Change Risk; hence my decision to focus attention in The Chameleon on these risks.

Assessment and management of common business risks is covered at a high level in the final chapter in order to round off the subject.

I am not an academic so I have written a practical work, with each challenge outlined and a practical example of a possible solution provided.

The book is available in Paperback and Kindle eBook versions worldwide through all Amazon websites, CreateSpace eStore (http://bit.ly/1IzgTEg) and eStoreT3P (http://bit.ly/1LZhALZ).

Ron Wells